The troubles of a handful of large U.S. regional banks may well accomplish what the Fed couldn't on its own: tightening the financial screws enough to slow down economic activity in a meaningful way.
the economy more. But now, there are early signs that banking troubles will constrict credit and damage confidence in ways that rate hikes alone have not.
That would change if the failures of SVB, Silvergate and Signature Bank lead banks writ large to adopt greater caution, curtailing lending. "We anticipate this shock is likely to lead to further risk aversion that will accelerate the tightening through this channel, making a recession by year-end even more likely," he said.Swings in the bond market are consistent with a story of tighter credit and a gloomier outlook for the remainder of 2023 than was the case a week ago.
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